Strategic partnering. (Checklist 148).

* This checklist describes the planning phases in partnering: the strategic decision to partner, structuring the strategic partnership, and selecting an appropriate partner. The principles apply equally to commercial partnerships as well as to public sector / private sector partnerships, for example, under the Private Finance Initiative (PFI).

The Internet and the growth of e-commerce is enabling closer collaboration between competitors, and the sharing of systems and commercially sensitive information.

Management Standards

This checklist has relevance to the MSC National Occupational Standards for Management: Key Role A--Managing Activities.

Definition

Strategic partnering agreements allow organisations to take advantage together of market opportunities and respond to customer needs more efficiently and effectively than they could in isolation. Such agreements may be for defined periods of time, and may be non-exclusive.

"Collaboration is the process by which partners adopt a high level of purposeful co-operation to maintain a trading relationship over time. The relationship is bilateral; both parties have the power to shape its nature and future direction over time." (Spekman)

Partnering means:

* sharing risk with others and trusting them to act in joint best interests

* a strategic `fit' between partners so that objectives match and action plans show synergy

* finding complementary skills, competences and resources in partners

* sharing information which may have been privileged or confidential.

Reasons for partnering

* Finding an outlet for excess manufacturing capacity.

* Gaining quicker, low risk access to new markets.

* Strengthening the technological base.

* Achieving economies of scale through high volume, low cost and mass distribution.

* Overcoming geographic, legal or trade barriers.

* Speeding up new product innovation and introduction.

* Major public sector projects may require private sector input.

Obstacles to successful partnering

* Strategic fit may be lacking and management styles may differ.

* As a result of a poor selection process, one partner may emerge stronger than the other, creating an imbalance.

* Implementation problems can arise from dissonance in leadership styles. Although there may appear a good `fit', traditional control methods may hinder the new interdependence required.

* Fuzzy communication and unclear reporting can lead to confusion, creating a lack of trust and confidence.

* Decision making may slow down because of the need to refer back to `HQ'.

* Key requirements for a market project are concentrated in one of the partners.

* There is a risk of sacrificing unique, high-value knowledge.

Phase 1: Taking the strategic decision

1. Think carefully about partnering needs

Few organisations have all the resources or skills to tackle new market opportunities or other initiatives independently and maintain the economies of scale of low cost and high volume for mass distribution. Going it alone can mean high investment, slower response to changing circumstances and an infrastructure that may require dismantling, possibly soon afterwards. On the other hand, partnering may mean sacrificing something unique and hitherto wholly owned.

2. Take account of the changing market-place

Take a good look at your organisation in relation to its sector and market position. Gain an understanding of who is emerging as a market leader and why, which market trends are beginning to dominate and which way things may develop in the future. The organisation's stakeholders--customers, employees, shareholders and suppliers--provide an invaluable resource to be tapped in this data-gathering exercise.

Carry out a SWOT analysis and look at how you got where you are. Do you need to invest in your technological base, in your processing capacity, or in new markets? Does market stability--or volatility--make that investment affordable or desirable? Consider what other organisations are doing to compete on innovation, service and value for the customer.

3. Determine where you want to be in the future

This may well mean re-thinking the business you are in or adjusting your business focus to concentrate on your core strengths. It is important not to be locked into the thinking of the past in order to express a clear vision for the future. It is equally clear that such a vision should be owned by personnel throughout the organisation as the understood driving force which energises the organisation.

4. Look closely at your organisation's processes

When considering a strategic partner it is vital to be fully aware of what it is really like within your own four walls. Try to gain a knowledgeable perspective on your:

* programmes for continuing improvement and development

* policies and practices of releasing authority to encourage initiative

* generation, manipulation and usage of key information

* ability to respond to changes in the market-place.

Identify those key processes at which you are, or need to be, best. Identify those skills which you need to develop and improve. Gaining excellence in a core competence is something that requires years of consistent endeavour and application. It needs updating and renewing, but it provides probably the greatest bargaining power in negotiating a strategic partnering agreement.

Action checklist--Phase 2: Structuring the strategic partnership

5. Decide on the field of co-operation

There are three different types of strategic partnership: horizontal, vertical and diagonal.

* Horizontal partnerships are usually formed with former competitors from the same industry as the partnering organisation. Collaborations in research and development purposes usually come under this umbrella.

* Vertical partnerships are usually formed with organisations in the supply-delivery chain, such as suppliers, marketers or distributors.

* Diagonal partnerships are created with organisations from other industries. A good example would be a public sector / private sector partnership to build a hospital.

In each case, complementary core competencies, strategic business fit, and ability to trust the other party are key decision areas.

6. Decide on the level of co-operation

Consider:

* which time frames are optimal for getting the project operational

* how much in terms of resources can be allocated to the project

* how formal the structure--legal form of organisation, process and communication procedures, control processes and organisation structure itself--needs to be between partners.

7. Decide on the level of involvement

To restrict the agreement to two partners may or may not be satisfactory. Strategically, innovation, production or delivery may benefit from establishing relationships with more than one partner, each bringing their own expertise and expanding the richness and the potential of the collaboration. In this case the partnership will move on from a two-way joint venture to a dynamic network of contributors. The addition of every extra partner, however, multiplies the possibility of something going wrong.

8. Decide on measurement and control issues

All strategic partnerships will need some form of control. It is vital to determine:

* which activities which partner will control

* how much control each partner will exercise

* how partners will exercise control.

It would be ideal for partners to have similar measurement systems, but this is unlikely. Contribution to, and outcomes from, the partnership may be difficult to apportion precisely when marketing and quality targets and learning objectives are key contributors to financial goals.

Action checklist--Phase 3: Selecting the partner

9. Identify intra- or extra-industry players for basic fit

This is largely a question of information gathering and analysis. Having decided on a horizontal, vertical or diagonal approach, search out the leading or emerging players which can add their strength to yours in a win-win situation. Bear in mind questions such as:

* What are the risks in such a collaboration?

* Does this potential partner have a hidden agenda?

* How turbulent is the existing/future market?

* Are there other collaborators or associates in the game?

Public sector / private sector partnerships can sometimes involve multi-billion pound projects. Selection of key partners is critical to success and to avoid budget and time overruns.

10. Establish a partnering champion

The partnering champion should be a senior manager who commands respect at all levels, has keen powers of analysis and gets things done. The champion will be responsible for laying the framework for the partnership agreement, spreading the `ownership' of the partnership and making it work in the start-up phase.

11. Examine strategic fit

Broad business focus is much more important than short-term goals so that the partnership fits with overall planning and does not cause a u-turn, or at least a detour. Belief systems, business plans, partnership structures and time scales will all have to follow from the business focus harmony.

12. Beware the hidden dangers

Cultural incompatibility may lurk beneath the surface of many potentially successful partnerships. Management style, organisational `feel' and the way things really get done are difficult to quantify and all the more difficult to assimilate, and they are often impossible to impose from the outside.